expired. chair recognizes the gentleman from colorado, mr. tipton. >> thank you, mr. chairman. chairman powell, appreciate you taking the time to be able to be here. one of the big challenges we faced in this country, the policies of the previous administration have yield aded a lethargic growth. it impacted communities across the country. we're seeing policies come into place, creating job opportunities, putting resources back into the pockets of individuals who actually earn it and creating that opportunity for people to increase their prospects for their family, communities as well. which i applaud i want to make sure they are applied across the board in the country as well to each community and i would like to be able to highlight one of the benefits i've seen in my district from the tax cut and

jobs act in colorado. the banks of colorado, which has significant presence in the western slopes of colorado, four corners region that i represent wrote me after passage of the tax cut and jobs act they anticipate the passage of the reform is going to be having a positive effect on the growth of their businesses an our local economy. in fact the bank of colorado added a special bonus at the end of the year for all 641 of their associates in colorado and new mexico. they're going to be receiving $1000 in terms of a bonus and part-time associates will receive 250 to $500. mr. chairman, in my part of the country that's real money. it is not a crumb. how we pay a mortgage. how we pay for the electric bill. how we provide literally for our children. to be able to boost hose opportunities for those employees it is actually helping main street right now. the bank of colorado's actions i think provide an example for

news terms of new possibilities that exist in the current economy and also looking forward. i guess what i would like to be able to speak to you on is, in my state of colorado, we, i often spoke to it as a tale of two economies. urban colorado has been doing well. their unemployment is down. however when we move into rural colorado we're just now, just now starting to see the signs of the recovery and those opportunities for the people who live in those rural areas. one of the real challenges that i have heard in our communities has been from our small community banks in terms of the trickle-down effect of overregulation that came out of dodd-frank. the best practices, being employed may not have been on paper but are implied and they're feeling real impacts. so i know mr. lauder milk brought up with you earlier in the questioning, in regards to

tailoring some of that rules and regulations to meet the size, the risk portfolio of the institution. can you give us an idea of what you see as that retail loring and when doctor -- retail loring, opening up opportunities for real america. >> for smaller institutions we're mindful of a number of small banks in rural and non-urban areas declined in recent years. we don't see that as a food trend. we don't want to bigger force as people move to cities, that kind of thing. as it relates to regulation, just recently here we dramatically reduced the scope and burden of the call report. we made exam frequency longer gaps between, between exams. i think we tried ways to

simplify the capital requirements because you don't need, you don't have the resources to be managing these highly complex capital requirements. in a number of areas we simplified. we tried to address the shortage of appraisers in many rural areas but you know honestly you could go on forever. it is a lot of small things and, we'll just tell you we're committed to doing more and i hope you will hold us accountable for that. >> i appreciate that, mr. chairman. i have a piece of legislation, the tailor act, to make sure we have rules and regulations written to the size and portfolio of the institution. appreciate your commitment and hopefully willingness to work with us because the objective is to be able to open up the doors of economic opportunity for all of our communities across the country and one issue which has been brought up to me in guards to the community reinvestment

act, if you would be willing to work with us as well. our banks do want to be able to make the real contributions back in but we've got some outdated rules we need it address. thank you. i yield back, mr. chairman. >> the time of the gentleman has expired. the chair recognizes the gentlelady from wisconsin, ms. moore, ranking member of monetary policy and trade subcommittee. >> thank you, mr. chairman and thank you, mr. chairman for appearing. just wan to appreciate the fact that in your written and your oral statement you have doubled down on your commitment to tend to your dual mandate to look at unemployment as well as the monetary policy. i just want to thank you, appreciate you for that. and given that, i just i guess i want to focus a little bit on some of the things i think previously mr. green just talked about and also my good friend, colleague, mr. brar talked about

in terms of tryin to figure out where t fed, how the fed is going to balance things. when we look at unemployment, for the general public, i guess i am, i am wondering if, if, if we continue to have 2% as our inflation rate is that in fact discouraging getting some of those groups like african-americans mobilized and moved toward more full emplment? do you take any guidancerom to may be 1/2%?terhaps >> i think we're pretty committed to our, we're strongly commitd tohe 2% inflation goal. over timehe tevel of

employme in the ecomy is not increase ity increasing inflation rate. so that we be equally concerned with undershoots, persistent undershoots of 2% and persistent overshoots. >> okay, well, given that, i'm wondering what your thougs are about the incased income inequality we see in this quality? according to the united nations report, united states is on track for being the most unequal, having the most inequality in the world and given the recent tax bill where we see, despite what mr. barr has indicated about all the bonuses and wage increases, that about 43% of these monies are being spent in buybacks, another

19% mergers acquisitions. 62%. only 17% in capital investment improvements of the 13% in bonus and raises, we know bonuses are one-time only events. which, pale in comparison to the economic benefit that the company gets. so what is, what concerns does the fed have about increase in income inequality? >> you know, it has been, big, very complicated set of issues. i point to a couple of things. the first, we've seen a stagnation of middle class median incomes and that seems to be closely tied to the flattening out of educational attainment and skills attainment by our workers. we need to have the best-trained workforce and most highly-educated workforce, that will translate into productivity that will translate into higher wages that should be a important

focus for us. >> before my time expires, mr. chairman, thank you for your patience, i am wondering if you think as the chair we're going to have this tremendous gdp growth? as you might know the cbo and the jct put additional gdp growth of the tax bill under 1%, despite the $1.5 trillion tax cuts, which will increase the deficits about that amount over 10 years. are you, do you agree with the cbo and jct that this, gdp growth is going to under 1%? >> you know the tax bill was passed about week 1/2 after our december meeting. the spending bill was a week 1/2 after our january meeting. so, in each case we really didn't have the full set of information. i think our view, my personal view would be that there will be

a meaningful increment to demand, at least for the next couple of years from the combination of those two things. >> there will be increased demand? >> yes. >> although wages aren't necessarily going to keep, keep up with that, given the way these monies are being spent? >> i expect wages to increase too as i mentioned. >> time of the gentlelady has expired. the chair now recognizes the gentleman from texas, mr. williams. >> thank you, mr. chairman and chairman powell, thank you for being here this morning. sound monetary policy is critically important to unleashing the economic opportunities of this great nation and her citizens and 2018 i can tell you i'm a small business owner with 47 years on main street. we're off to a great start. with a booming economy, low unemployment and americans having more money in their pocket due to the tax cuts and jobs act. though i'm encouraged by the strides we made in the last year i do acknowledge there are much work to do. i look forward to working with

you to insure that our economy is fully empowered and never unnecessarily restricted. so question, federal reserve bank presidents serve a critical role in providing local information to the fomc. this bottom-up flow of information is one o the federal reserve system's most productive feares. howeverhe voting rotation exses inconsiency some of e largest dtrictconomies cast a vote every thr years while smaller ecomies are year. so chairman, is it yr opinion that each region is pperly represented under theurrent voting structu? >> lete beg by saying i a very strong supporter of our federated stem and i thi that what theeserve bank syem does divertty perspectives around t table. reserve banks, 12 economic staffs you me mistake when everybo agrees generally, been my experience. when y have divse perspectives, people

disagreeing. so inerms of the structu i don't rlly think it is broke i will say when we havetable, ak espridents are speaking and honestly i have to remd the list who the vers are and who aren't the voters. not so much who has the vote, it is who has persuasive things to say. i think the current equalibrium served us well, i wouldn't see a reason tohange it. >> i believe that monetary policy woulde better iormed districtepresentatives voted consistently and san francisco, atlanta richmond and dallas vote every three yearshile new yorky other yr. i figure thi underrepresents rtain economies and the need of regionshatot ve more frequently could benjustly prioritid. fomc helps to dve empower eve economic constiency acrosshe country. for that reason i have

introduced hr 4759, the fomc representation improvement act that would provide every federal reserve bank president consistent voting rights just as new york currently enjoys. so chairman, do you support policy would allow all district consistent voting rights and, be as he detailed as you want to be? >> no. again i would just say i really think the current system has served us well. i think you have a great reserve bank president inexas. certainly welheard as it shou be. >> okay. mr. chairman, i yield my time ba, thank you >> thank you. >> yield to thehairman. >> yield to the o gentleman from texas,r. chairman, again as we rely more on the ioer and le o the fomc to determine the fed funds rate,he tn haven't we diminished the role of these regional fed presidents?

i similar to the board of governorsut it is the board of govnors that t ioe correct? >> as a legal matter, yes,ut it is always set consistt with the bader decision of the fomc. based tha mn we should attempto nmalize monetar policy t insure that this diversyf view is rresented at the table. spking of divsity ofie vw, last year in a speech in new york federal reresve bank president quote, the lin between market-making and proprietary trading is n always clear-c whichakes regulationn this spac dficult. giveniscretion to tding desks that facilitat volatile. we have seen historic volatility andlliquiditynur fixed come markets sce the advent

of the volcker rule. do you agree or disagree wit president dudley's anasilys? >> i wouldgree. my viet the volcker rule to try t implement it in a way that'saithful to the spirit and letter o the law but dot in a way -- we've had aot of testimony in this committee about how this does inhibit job creation and economic growth and the financial choice act we repeal the volcker act and volcker rule, in alternative we have legislation to make at least the fed the lead regulator so there would be one centralized regulator and exempt community banks. would the fed be ready to take on that role since this would be signed into law? >> we would. we would probably take it on even without law. i think we're the natural group to take, to have the pen there. its is multi-agency rule and someone need to coordinate it we would be happy to do that. >> thank you the time for the gentleman from texas has expired.

the chair recognizes gentleman from nevada, mr. mccue wan. >> thank you, mr. chairman and mr. powell for being here and your testimony. have a couple of quick questions. as you know i represent nevada which had highest unemployment rate in the country during the recession. so, despite the progress in reducing the overall level of unemployment since the recession, wage growth has largely remained low and stagnant for the vast majority of americans. in fact average american has not seen a real pay increase since the early 1990s. working people have not seen one since the 1970s. according to the economic policy institute, middle-aged workers hourly wages are up only 6% since 1979. low-wage workers wages have decreased by 5%, while those with very high wages have seen an increase of 41%.

basically pig foy backing on -- piggybacking on what miss beatty was saying rich are getting richer at the expense of middle class people and, i say this you know from somebody who has been unemployed before, who has woken up, gotten dressed up, and having nowhere to go but just knowing that if you keep your head up, you're going to find something and everything will be okay. but most of the people who are receiving the tax breaks today don't understand that struggle most americans have gone through. with that in mind what steps can the fed or congress take to help combat this wage in equality to piggyback what miss beatty was saying and insure that further wage gains are shared by middle wage and lower-wage workers?

>> i think our part, sir, is to take seriously our obligation to achieve maximum employment. that's what we're doing. and, i would say more broadly on wages, overlong periods of time, the only sustainable way for wages to go up is for productivity to increase. productivity is function of investment in people's skills and investment in plant and equipment by businesses and by people and so those are things i think that congress should, we don't have those tools. those are not things we control but those are things that congress and administration i would believe would be well-served to focus on. >> thank you, mr. chairman. and do you think that the minimum wage requirements offset the failure of the private market to afford workers liveable wage? we've seen this discussion, you know in the last couple of years, whether we should be raising the minimum wage nationally. you know, people have been talking about $12 an hour. people have been talking about $15 an hour.

do you think this is something that needs to happen here in america? >> you know, minimum wage policies are really form of fiscal policy really not for us. there is research that shows you know, for example, that people who provide less value than the minimum wage or entry level workers, that kind of thing can be disadvantaged. and there is research that shows that they aren't. these are questions really best left for you. >> well, mr. chairman, you are the chairman of the federal reserve and i know you're an expert. you probably know more about this than i do but i believe, when you increase the wages on working class families, they spend more money, they go out there, stimulate the economy. businesses make more money. they hire more people. they expand, they open up a second and a third store and so on and so on. whereas you know, i know some of my colleagues believe somehow you give these big tax breaks to the millionaires and billionaires. and somehow it will trickle down

to the workers. i don't believe in that. i represent part of las vegas where a lot of folks are hard-working people, janitors, housekeepers, cooks, chefs, waiters. those folks are the people who make las vegas run. if you increase wages to those folks they will go out there and spend more money and stimulate the economy and that is the reason why i believe we've had this wages, you know, inequality in this country but with that being said, mr. chairman, my last question, why has the fed been so focused on preempting inflation since the 1980s when wages have been barely budged? >> well i think it serves all constituencies well, including by the way the peep in the lower income groups to have low, to have inflation low and under control. i mean it really hits those groups the hardest when inflation gets out of control. i think it's a good thing for the economy we managed to control inflation. i think the way we get at wages again is by taking maximum

employment seriously. i think at the moment we really done that for some years we've really done that. it will show up in wages. >> thank you, mr. chairman. >> time of the gentleman has expired. the chair recognizes the gentleman from arkansas, mr. hill. majority whip of the committee. >> thank the chairman. i thank chairman powell for his testimony today, listening to the discussion this morning. i think we need to be clear on the record, both chairman, chairman of the committee and chairman of the fed, that the biggest thief for working people in this country and across the world is inflation. nothing depresses buying power more than inflation and nothing cuts into those at the hardest working part of out society than inflation. so i think minimizing inflation and having dollars stability and safe and sound capital markets are a worthy objective of the fed and so, thank you and your colleagues fighting for modest

inflation so people have real wage increases. and i do believe one of the benefits of the restructuring of our tax system will be to increase productivity and productivity will see wages go up and we've certainly seen that here in the first two months of the year as company after company has talked about that. mrs. moore referenced it as well. but i saw a morgan stanley research study this week that calls for earnings projections for 2018 to be up 8%. and that over 44% of those companies fully expect to reinvest in their companies, in training and capital expenditures and both these efforts will produce higher wages. and another 30% of companies plan to increase cap-ex, increase productivity as well as distribute more earnings. so i view these things as positive for our economy. want to follow up on chairman hensarling's comments, a bit,

chairman powell, on the exchange you had on the volcker rule. the chairman talked about the bill i've introduced to harmonize regulatory oversight because you have noted in previous testimony, president dudley has, even mr. turillo has, about complexity of this rule, that we're not getting it done. we're not doing a good job of even enforcing the rule but on this harmonization bill i have some difficulty getting members to understand, giving relief to banks un$10 billion, community banks, which is what in senator crapo's bill in the senate, somehow letting those community institutions sort of off the hook of safe and sound banking practices. i'd like for to you respond to what i have told them. by saying our community banks are not subject to the volcker rule, that doesn't mean they're not subject to the careful scrutiny of our bank regulators

for safe and sound banking practices. and isn't it true if one of your regulators went in a bank under $10 billion, a holding company, they were doing something you deemed unsafe and unsound related to volcker-type activities that they could be disciplined for that under the existing banking rules? >> yes, sir, it is absolutely true we don't need volcker to two in and find unsafe and unsound practices. in addition, in the bill you mentioned that senator crapo introduced, you also is to, you can't have anything more than a very small trading book. even fur under 10 billion. >> right. >> so we don't see significant safety or soundness implications at all from that. >> i appreciate that i think we need to be clear in this committee we have the tools necessary to enforce safe and sound banking practices for banks of all sizes, particularly those in the smaller size referenced in my legislation but the real mission here by

designating the fed as the principle regulator among your colleagues that will get better, more discrete, interpretive guidance how to properly enforce the volcker rule which i think is big source of confusion around the capital market system. do you agree with that? >> i do. it has been difficult with multi-agency groups to get into agreement. the volcker rule i think in particular is quite complex. i think we can certainly simplify it. >> i think when you testified previously, some trading desks need ad quija board to figure out what the decision to make. that freezes up capital markets in times of illiquidity i'm most concerned about is misinterpreting that rule by compliance departments. have you seen that in your work with your distribute bank presidents about that exact thing? where we're hurting illiquid securities? >> we do hear that. we do, i mean i think if you, it stand to reason if you provide more certainty about where the

the law applies and where it doesn't, you don't have to cop screen a giant meeting and break out the quija board whether you're compliant with the law or not you will have certainty and people being able to do their business better. >> i appreciate you, i wish you my very best wishes for your service as federal reserve. >> time of the chairman has expired. the chair recognizes the gentleman from minnesota, mr. ellison. >> thank you, mr. chairman and welcome to the committee, mr. chairman. mr. chairman, the cato institute estimates ending today professorred action for childhood arrivals program, making those people deportable could coast the economy $280 billion and reduce economic growth over 10 years. center for american progress puts that number 460 billion, bigger but, still a loss. the u.s. chambers of commerce does not put a number on it but they do say, and i will quote,

ending daca would be a nightmare for america's economy. so what kind of economic impact would ending daca and making 700,000 "dreamers" deportable have on our economy? >> well, let me say that these are difficult and important issues and we of course don't do immigration policy at the fed. >> i'm not asking you about immigration policy. i'm asking you about economic impact of taking 700,000 people, 90% of whom are employed, out of the economy suddenly? that is what i'm asking you about. >> and i don't want to wade into hot political discussion but i will say this. so you think about economic growth. it can really come from, only in two-ways. you can simplify it. either more people working or higher productivity. we talked a lot about productivity but the workforce

is now growing at only.a percent per year. some of that has been from immigration. to the extent you care about potential growth you need to consider that in your discussions about immigration. >> so what i hear you saying, taking 700,000 people, 90% of whom are employed, out of the workforce, would be, could cause problems? >> just not going to comment on that particular situation. >> i hear you, but i mean, but i'm asking about the economics of it. i'm asking you as somebody who leads an institution that has a mandate, not just to keep inflation down but to pursue full employment. you have a dual mandate and i'm asking you about employment. and you're declining to answer my question. would you like to just talk about what it means, would you talk about what it would mean to take 700,000 people out of the economy? say they all went to mars for some reason? >> if fairness, congressman i am really not getting into the debate over daca. i'm not going to do that. >> i'm not asking you, sir, i'm

asking you to talk about the economics of it. >> i said -- >> let me see if you can answer this. what, what does it mean to have a group of people in their prime working years suddenly disappear from the economy? >> well, all else equal you would lose some productivity from that, some output from that. >> you okay, thank you very much. so there's a research group known as reveal. they did a study, looking at literally of millions of hamda reports. i would like for unanimous consent to have their report submitted for the record. >> without objection. >> yeah, but they looked at 31 million hamda record in a year long analysis and found that 61 municipal areas across

the united states had unfairly, had denied people of color, black and brown people the right to take on a mortgage compared to equally-qualified whites. what is the economic impact of that discrimination in your view? i mean when people are, when people can afford a mortgage and are told, you can't have one what sort of impacts can we expect to see when that happens on systemic basis? >> i think it is so fundamental to our society that there should not be racial discrimination along the lines of credit availability. >> that is moral position and i agree with you, but i want to know how does it affect the economy? >> well, start with those people. i mean i think if people are denied access to credit, then they're going to be less able to attend school, perhaps less able to start a family.

less able to you know, move to a new job. all kind of things. economic outcomes for individuals would be potentially significantly reduced. i think if you, take that out across a prod population, it would certainly hurt the growth of country. >> well i want, i do want to get your views on whether you agree with fed chairman neel kashkari that increasing legal immigration would grow our economy but i probably have to get that answer another time. >> time of the gentleman has expired. the chair recognizes the gentleman from north carolina, mr. budd. >> thank you, mr. chairman. chairman powell, again congratulations. you heard it many times today. we're glad to have you here. would it be fair to say that the current administration is willing to review and perhaps even question decisions made by the fsb, the financial stability board in the past? want to have some of your thoughts on that, about looking back at decisions they made. would you be willing to review and question those?

>> sure. i mean we, i think we always, the fsb doesn't make decisions about u.s. regulation. they make recommendations and, if we were to enact something in a law, in a regulation, sorry, we would put that out for comment and, you know, anything like that could be, could be reconsidered in principle, sure. >> as much -- >> i don't think of anything that comes to mind, maybe you help me. >> i have one in particular but as much as their opinions influence policy, there is one in particular i'm thinking about. so in 2013 fsb instructed the international association of insurance supervisors to create a new international capital standard for internationally active insurance groups. there seems to be universal concern among u.s.-based insurers that the current trajectory of these discussions would be bad for the u.s. market and u.s. policyholders. so many times when questioned, the iais leadership attempts to hide behind the fsb. they say fsb told us to do, they

told us to do. so it is my view these negotiations on international capital standard, if they don't move in more positive direction we might just need to rethink how their policy affects, how the fsb gets affected by the fso. i want your thoughts on that and going back reviewing that particularly with the international capital standards. >> you know i sue served on the supervisory committee for several years. i have not been involved for some time. i'm not exactly sure where that one is. i know we rolled that capital requirement in broad form. i have to come back to you where that stand, if that is all right. >> sure. one of the things may have the fsb involved in new directives. just going to confirm or you're willing to work with the fsb to -- so many acronyms in this place, isn't there? >> a lot. >> would you have the fsb review

that? >> can i confer with people who do insurance regulation. i promise to come right back to you. >> no problem at all. thank you. i yield back. >> would you yield to the chairman? >> yield to the chairman. >> i appreciate the gentleman for yielding. chairman powell, i want to revisit an area that we had spoken about briefly during my questioning. i'm still not sure i'm completely clear on the answer. this has to do with the runoff on the balance sheet. again the monthly cap on your security rolloffs, your treasury security roleoffs will rise to 30 billion in the report you released i guess friday but according to data from the system's open market account you don't have 30 billion of treasurys securing every month.

i'm trying to figure out, are you making up the short falls? did i understand you to say these caps are flexible? i still don't quite understand what you intend to do when you don't have enough treasurys that are actual maturing so hit the 30 billion? >> purposes of the caps was to give us a way to gradually let, you know, gradually start the runoff. you're right the caps will not be binding for treasurys or mbs in most months. only for treasurys in the big treasury financing months. so you can think of them as not really restraining either. so we didn't, we weren't saying, our projections don't say we'll roll off exactly 50 billion per month. that is not how it works. that was never how it is intended. we don't know how fast mbs are going to run off, because they run off depending where interest rates are. we do know with treasurys, we're moving right along. these are significant reductions, this year and next year in the size of the balance sheet.

>> so as of a couple of weeks ago, the balance sheet, if i saw it rise was at 4.4% trillion. and by year's end, at the current rate of rolloff, it ought to be at 4 trillion. and if you kept to the pace, 3trillion, two additional years of roleoffs, about 2 trillion, four years from now. does that sound about right? is that the current expectation? >>ing something like that, yeah. >> okay. but that still leaves your balance sheet roughly twice of what it was precrisis era? do you expect it again to stay there and, do you not expect the demand for cash to wayne as -- wane as interest rates rise? >> right now we have $2.2 trillion in non-reserve liabilities. so that is to say, when we shrink the balance sheet, what goes away is the reserves. that's, that's liability that

goes away. so that 2.2 trillion liability should add on whatever equalibrium demand for reserves is. it will be at least hundred billion billion no matter what we do. that is how i get to 2 1/2 to three. >> time for the gentleman has expired. recognized gentleman from illinois, mr. foster. >> thank you for appearing here this is important part of communication with congress. i would like to question the dangers of default. would i like to repeat his thanks to you congress about the necessity of seriously our payments on principle and interests. when a country simply does not have the ability to repay the debts if you think about iceland, where there were debts banking crisis of gdp, no way to

pay it off, much less the country. the self-inflicted wound like voluntary failure a country has more than enough money to pay its debts simply for some sort of political reason refuses to do it. over time both parties have been guilty of abusing an weaponizing the, you know the debt limit. and i just want to encourage you, that there is a bipartisan consensus that could be assembled, to permanently get rid of it. it is always of being abused by which every party is in the minority and, at some point i think everyone should step back and, you know, you're an important part of opinion making, in washington and in financial circles. so i want to, anything you can do to encourage that actually happened. there may be a moment when the stars aligned and we can just get rid of this sort of uniquely dumb thing that we do of

threatening to not pay our debt. is there enough money? you hear often, there is not just enough money because of things like the publicly held debt. there is just not enough money and we have to cut medicare. we have to cut, you know all the things all people depend upon. i would like to go into that. u.s. household net worth is sometimes this year will go over $100 trillion, okay? 100 trillion. publicly held debt is 75% of gdp. so it is around 16, 17 i would guess. wouldn't you agree there is clearly enough money in the united states to pay off our national debt? will we ever reach a situation where the world says they are just, there is so much debt in the united states public or private that we simply can not do it, we can not cover our debt? >> i wouldn't want to run the

destest i would not say this time by a long shot but there could come a time about the public, the global debt-buying public would come to the view we either weren't prepared to honor our debts or we couldn't service them. we're a long way from that. >> that is different, for example in japan, where the debt is 200%, running more than 200% gdp the markets are not concerned simply because the amount of private wealth in japan is more than enough to cover that. the situation is different in china. there is huge amount of often unacknowledged private sector debt. when you think what will happen when that debt fails, that will land first on regional banks and then the main banks. basically on the government's balance sheet. so there is a real danger in the case of china there is just not enough money in china and enough wealth in china to cover the debt. and so i think, would you agree there is fundamental difference in the united states, that we actually do have the money to pay off our debts by a long

margin because of the large public wealth in this country? and that really it is a political problem that we face rather than one of just not having enough money? >> yes. we certainly have enough money to service our debts, honor them without question. really issue, servicing them gets more and more expensive as they accumulate and as numbers go up. those bills will be boone -- borne by our children. >> i agree completely. wisdom of lowers taxes at a time frankly the economy doesn't need to be stimulated is something, is sort of elementary macroeconomics. you run a deficit when the economy is in trouble. when the economy recovers you pay off the debt that you have accumulated in order to smooth things out. let's, you have a section on page 14, 15, of your report that you're presenting on the low inflation in advanced economies

which is something -- do you have any thoughts on really what's, what your main suspicion is for why that is taking place? >> it has been a long-run trend. inflation has been coming down for 25, 30 years, all over the world. and it probably has something to do with, with the aging of the population and with, you know, low productivity, and those sorts of things. it probably also has to do with, sorry. >> time of the gentleman has expired. the chair now recognizes the gentleman from maine.

snoop mr. powell, we are blessed with such natural beauty. we have 3600 miles of breathtaking coastline. we have thousands and thousands of lakes and ponds. hundreds of miles of rivers and streeps. we're also called vacation land. you look like a fellow that probably needs a vacation. i'm not sure if you booked your maine vacation, yet, if you have a problem mr. powell, you call up our office we'll help you out. when you go on the maine vacation, this is great time to go for snowmobiling or the summer, you find throughout our district, rural part of maine mostly we have a lot of shut-down factories and mills. when i was a kid growing up we had 2 dozen paper mills. we have six left. they're healthy. look at lot of our textile and tanneries and shoe factories, mostly shut down. we in many cases mr. powell done that to ourselves with trade agreements that were unfair and hurt our workers, high taxes that didn't allow to us be competitive. we partially fixed that problem

back in december with passing tax cuts. then constantly regulations. i'm sure you're familiar, with mr. powell, competitive enterprise institute computation that says, i summarize, about $1.9 trillions a year cost is paid by our employers and through them, passed through to some of our consumers. $1.9 trillion cost just to comply with federal regulations. not state and local. just federal. so, is it fair to say, mr. powell, that unnecessary, costly regulatory burdens hurt the economy's growth and hurt job creation? is that a fair thing to say? >> i think it is, yes. >> okay. would you look at the past year, 2017 and up until now, when you have the economy growing at roughly three or so percent as compared to 1.7%, last roughly eight to 10 years. is part of that increased economic growth and more jobs, fatter paychecks the result of repealing unnecessary and

expensive regulations? >> you know, intuitively i would guess that it is but very hard to pin that down. very hard -- >> i think anybody, with all due respect, mr. powell, who run a business as i have, realizes if it is less burdensome to run my business and sell products to services i will be more competitive, i will be able to hire more people and do better. let me give you an example. this morning i met with 100 foals from credit unions in maine. these are wonderful people that are spending more time or too much time dealing with compliance as compared to pushing money into the community so businesses can grow and hire more workers. can you commit today, mr. powell, that you will do everything humanly possible within your purview to make sure that the regulatory burden for our small financial institutions are controlled and hopefully repealed? >> i will make you that commitment? >> you will or will not? >> will. >> thank you, sir. if you are taking a look at senate bill 2155 which deals with part of the choice act we sent over to the senate. they're dealing with issues, in

particular with small credit unions, community banks, that help them deal with the regulatory burden, have you taken a look at that, sir? >> i'm not so good on numbers of the bill. does this bill have a name? >> it is i believe mr. crapo's bill. >> great. i'm familiar with that. >> you're supportive of that, deals with exactly you and i talking about. >> it is constructive enterprise. the aspects you and i are talking about are -- >> let's move forward, mr. powell. appreciate that. let's talk about what mr. foster was talking about. this is wonderful talking about the national debt. this is $21 trillion. mr. hensarling is careful to put up it up every time we comb here. i tell you it makes my belly sick. other folks in last administration mr. powell, this is no big deal, bruce. $21 trillion in national debt. i used to be straight treasurer in maine. we knew how to balance our books and spend only what we took in. when i was there debt clock was

unwinding. now we have 240, $245 billion per year interest payments on the debt. mr. powell, do you take a different tack from folks here earlier, last administration, do you think this is a problem? >> do i think -- >> $21 trillion in debt? i. >> i think we're not on sustainable fiscal path. >> i would agree with that. we can agree this is problem. with that said, sir, my second day here in congress i could sponsored, first bill i cosponsored balanced budget amendment of united states constitution to finally force washington to live within its means, start balancing books, start paying down debt. do you think that is good idea. >> not a supporter of balanced budget approach. supporter of sustainable fiscal path. >> mr. chairman, i'm going to come back to mr. powell on that at some time. >> time of the gentleman has expired. the chair recognizes the gentlelady from ohio, ms. beatty. >> thank you, mr. chairman, thank you, ranking member. thank you, mr. chairman. certainly one would expect with

you being chair of the federal reserve that questions would be centered economic projections, economic developments, financial stability, monetary policy. but i'm going to keep in my true form of asking you the same question that i have asked everyone who has sat in that seat. are you familiar with section 342 of dodd-frank? >> yes, ma'am, i am. >> okay. with that, the office of minority and women inclusion in your short time which i's, but you also have half decade of being chairman of that board. tell me what your proud about under your leadership. >> as i mentioned, i'm now

involved in my 7th reserve bank presidential search. in every case we've been able to expand the universe of diverse candidates and, and select diverse candidates. i'm proud of that. i think the reserve banks do a good job, by the way? i think at the board, chair yellen started a group of, group of us meet regularly to try to advance diversity and inclusion agendas at the board? i would -- >> who is your person. >> sheila clark. >> and do you think you can increase your numbers as chairman yellen had worked on, rising them? while it was a fair job under her and i asked her a question, she admitted it could be better. while the entity has done something, i want to hear how we can do more. it is still not ating brags rights in my opinion. so i want you to think about that. we have a lot of people who are

in the audience today in green t-shirts who represent many of the people who i represent in the third congressional district. many of them women. many of them women of color. who also are concerned. only difference with them, they put the people face, the human resources on the same monetary policy and all the questions my colleagues on the other side have been asking you about numbers. have you met with these individuals in. >> yes, i have. >> okay. and can you share with me some positive progress that you or the people who work with you are doing with them? >> so we met with a group, with the green t-shirts, a couple of years back. wanted to tell us what was going on with their communities. frankly i thought it was a proud day. we sat there and listened to what was going on in their communities. it was very respectful t was useful. we also, you know, have other

meetings. >> would some be one on your staff be able to send me a report so i would have something in writing to know some benchmarks? because i know in meeting with them and their representatives they have specific questions they're asking about interest rates and how we help improve the economy for what we call working middle-class americans? so, lited put it a different way get a report from your staff sharing you had a meeting with type of commitment with things you will work on. would i like to have that. secondly let me move to another financial question. i noticed in your report there was not anything about the stock market. can you tell me if you think the stock market is one of the best or better indicators of the strength of the economy or the strength of the financial

conditions of for everyday americans? i ask you this because a lot of my colleagues on the other side have been bragging a lot about the stock market and how the stock market is going up? >> so, there was one reference in there about the recent volatility. i don't think we called out the stock market by name. that is kind of what we're talking about. you know we don't manage the stock market. we manage to stable prices and maximum employment. the stock market enters into our thinking. it is an important place for businesses to raise capital. it is an important place for investors to invest. >> is that a yes or no? in your opinion? >> in my opinion is it what? is it important indicator of the overall state of the economy? >> yes. >> i think the general thinking is the stock market is the not economy but a factor. it plays a factor. >> would you say only 50% of americans own stock markets so the other 50% who may be women and minorities don't? >> that's right. yeah. >> time of the gentlelady has expired.

the chair recognizes the gentleman from georgia, mr. loudermilk. >> thank you, mr. chairman. chairman powell, thank you for being here today, spending so much of your day with us. we really appreciate it. it is important that we have this dialogue. i want to talk about something i don't know that has been discussed much here today but something very important for me especially spending over 20 years in the i.t. industry, dealing with securing data, and that's something that has been on the mind of most americans and that is cybersecurity and protecting the data that, of americans. one of the areas of interest of mine, i have stated this in almost every hearing we've had on this topic, when i was in the military, working intelligence, i worked on technology side of it, and of course when you're dealing with the nation's secrets, there is a huge responsibility to protect that information. we had a simple principle. that principle was, you don't

have to protect what you don't have. which means if you don't absolutely need it, get rid of it, otherwise it becomes a risk. i'm sure you know that the federal board of governors experienced more than 50 data breaches since 2011 and of course that is very alarming given how much data the government collects and not only collects itself but requires private sector businesses to collect which means they have to protect it as well. and your predecessor chair yellen told me when i asked these type of questions that the fed follows the nist cybersecurity framework and was working on minimizing access to sensitive data. i would like to follow up. what are your, what are you working on to strengthen the fed's cybersecurity profile and to protect the data that you have? >> thank you. so i'm just getting started on this so, you know, i will place a high priority.

i think chair yellen and others did before her too. we need to protect the sensitive information that we do have and we don't need to collect sensitive information that we don't need. that is very fair point. >> thank you. >> so i think we've done a good job the we could certainly do better. it will be a high priority. >> i appreciate that. and that is one of the areas, and i'm glad to hear you say that you're looking at, disposing of, not, keeping certain data unless you need it. that is something i think that we overlook as a government, because access to information is power. when you have it, you have to secure it. transition over into another area we've been dealing with here. i understand you're supportive of some regulatory relief proposals that we have pending in congress, increasing the sifi threshold, 250 billion from the current 50 billion. while i believe mr. luetkemeyer's sifi designation reform bill takes

more thoughtful approach in designating systemic risk but still a step in the right direction. can you kind of help to explain why banks under 250 billion in assets don't pose a systemic risk to the economy? >> as a general matter banks under 250 billion are more engaged in the traditional business of banking, less complex activities. of course they're much smaller. they have smaller footprints. the way the senator crapo's bill works is, we would still have the ability to create a framework to look below 250 down to 100 billion institutions to identify places where perhaps enhanced standards might be applied. so that is the way the bill works but i think our view has been that combination of raising the threshold and giving us the ability to go below it in cases where needed gives us the tools that we need. >> from what i understand even some of authors of dodd-frank bill are saying that 50 billion

was a wrong direction that we need to adjust. i appreciate that. one last question. what is the fed doing with the private sector on faster payment technologies? are you engaged in that at all? >> i'm glad you asked. that i was right in the middle of my prior life at the fed. that came out of the thought we're falling behind other countries in faster, you know, widely available mobile payments that sort of thing. so we really convened a group of companies and consumer groups and regulators and customers and everything around the table and tried to make progress toward faster mobile payments i'm really proud what we done >> thank you for your leadership i'm looking forward to working with you over the next few years , thank you. i yield back.

>> the chair now recognizes washington, mr. heck. thank you, mr. chairman and chairman powell congratulations on assuming this incredible and awesome responsibility for the country. i'm going to ask you the same question i've asked each of your predecessors since i've been a member of this committee. when does america get a raise and the reason i'm asking that question is because we've obviously been through a protracted period of time in which wage growth has been fairly stagnant so before you answer, sir i know you're probably going to make some indication of the up-tick in the latest report to wage growth of 2.9% and i just want to qualify your response by reminding you that that 2.9% was probably impacted by some transitory or one-time bonus payments and if you disaggregate the data between supervisory and non- supervisory employee, non- supervisor supervisory employees didn't get anywhere

near 2.9% and 2.9% even in and of itself despite how encouraging we may or may not put it in the context of the last 18 months or so is significantly below moderate historical averages of closer to 4%. i'm really interested is when is this economy going to function and grow in a fashion that enables americans to get a meaningful raise? >> so over time wages should grow in keeping with basically the sum of inflation and increased productivity so if we assume inflation is around 2% it really comes down to productivity. productivity since the financial crisis has averaged increase of about half a percent, and so if you think about wages have been increasing at about 2.5%, so that's why and before the crisis wages were increasing at full employment maybe 3.5% and that's because productivity was 1.5%, so we really need if we want

wages to go up on a sustainable basis over a long period of time and that is what we want we need to have more productivity and that's unfortunately not the things we have the tools for. >> but is that true, mr. chair? it seems to me that they're not unrelated to the degree that you'd keep your foot off the brake and allow unemployment to continue to fall and i'm going to return to this issue and some things you've said on the record in the past about whether or not we should be looking at unemployment rates or wage growth as a measure of full employment per se, but to the degree that we keep our foot off the brake and allow you three or you six or pick your measure to continue to drop and continue to create pressures in the economy for wage growth to continue, does that not in and of itself incentivize businesses and employers to invest in labor- saving devices and improve productivity?

is it not possible that improved wages themselves can help lead to improved productivity which can create a virtue us cycle with wage growth over time? >> yes, and that is exactly what we hope is happening right now, so -- >> so you're committing to keep your foot off the brake? >> [laughter] >> when i was getting ready for this hearing i went back and read something that you said in your very first year on the fomc committee, at the very first meeting one of the bank presidents mentioned tighter labor markets and you noted that you haven't seen anything in the wage data yet to support that and it struck me as interesting because it got me into thinking about you three and you six and my frustration with both and how its been i think two and a half years since we hit the suppose ed definition of full employment yet you three keeps dropping and the definition of full employment keeps chasing it and

it made me wonder as it relates to what you said earlier. why don't we just, why don't we just use wage data to help define what full employment is? >> well we use it as a factor to look at, but look, i think it's important to see though that, you know, for a long time there was slack in the labor market and that argued for continuing to support lower unemployment. we've reached the point where the risks are really two-sided now and we need to keep that into account because if we do get behind and the market, the economy does overheat, we don't see that now, but if that does happen then we'll have to raise rates faster and that raises the chances of a recession and recessions tend to hit vulnerable populations the most so that's why we're raising rates on a gradual path. we're trying to balance the risk of, you know, getting inflation up to 2% with a risk of the

economy overheating. >> fair enough, mr. chair but i would only observe that you tap the brakes at the expense of the people who have over a long period of time not received a raise. >> time gentlemen has expired and we now recognize from new york ms. tinny. >> thank you, mr. chairman and thank you, mr. powell. i appreciate your long time here and i think i'm at the end of the line for you here today so i just have a couple of quick questions to deal with sort of in the weeds policy and first would like to ask you about the federal open markets committee and their role in determining interest on excess reserves. back in 20006 congress passed the financial services regulatory relief act which authorized the federal reserve to pay on excess reserves at reserve banks; however when the bill got amended, the federal reserve in determining those interest rates was left to the

board of governors and not to the entire federal open markets committee and we know this is a valuable tool using the entire committee to determine monetary policy. my question for you is would you support an initiative or a legislation that would give the full role of determining what the excess reserve amount, excess interest on reserve, interest on excess to an entire expanded fomc and the federal reserve? >> i guess i would say this is less of a problem than it seems to be. >> okay. >> the full fomc decides the range for the federal funds rate and the ioer is only set at the top of that range, and so it really is the voting members of the fomc who decide that so it's not, it would have been a reasonable decision for congress to do that. i'm always there to support changes to the federal reserve

act because that opens up the act but as a practical matter this is not a problem we need to solve because there's no difference between the two things. >> so would you be supportive of non-supportive of legislation that would allow the district presidents basically to weigh in on that decision as well? and if not why not? >> i don't think we're looking for legislation. >> okay obviously, i always like less legislation but in this case we're looking for more stakeholders to be in part of the decision process. >> so i think the real decision that's made is the one that the bank presidents do take part in and it sets the range for the federal funds rate. they make that decision with us under the law. this is just an implementing thing and if i thought it was really unfair or a problem then i would support a change but i don't really think that it is a problem. it's less so than it would appear. >> its been expressed by them they would be interested on having that, i wonder if you would consider supportive of that and let me go to the next thing and that would be the

federal open markets committee blackout period and how you feel about that and whether we could restore some transparency to that period whether it's necessary to go through that part just so we know we have an ability to find out what's going on during that period, that eight times a year when the committee is meeting where we don't have an opportunity to hear from the stakeholders. >> i want to look at what you're proposing. >> okay. >> the whole idea of that period is that we don't speak publicly to market participants or anybody about monetary policy during that period and that gives us a chance to keep our mouths shut for a while and let us get in a room and do our thinking and then we come out of that at the end of the fomc meeting and make an announcement and then there's a day or two and people can give speeches and that kind of thing. >> do you think there would be anywhere in there on certain parts of the policy that would be maybe better off with more

transparency on certain issues? obviously there's some you'd like to keep in the negotiating process, but others where we could at least speak out and know it was going to come out at that point? >> you know, i think i'd be happy to discuss this with you offline. >> thank you, i have a bill of legislation that would just offer a little more transparency on that aspect of it not to eliminate the blackout period but to minimize some of the issues that with not allowed to be revealed during that blackout period. >> concerned that when we're actually thinking about what to do with the next meeting that we kind of take a step away from our public conversations and that generally has been seen by us as a healthy thing. >> one other quick question on another topic. the wall street journal recently reported that two monetary policy specialists will serve as your senior advisors and you may recall our house passed the form act provides for each federal reserve board governor to also have access to two senior

advisors, chairman howell, would you be willing to allow two senior advisors to help a more diverse set of perspectives to your committee's monetary policy deliberations? >> i do remember that provision of the bill. >> [laughter] >> but i think the board has changed really in the time since i've been there we're back to where every governor mass one or two advisors and we don't need legislation on that. >> okay, so that's something you'd support? >> time has expired. >> thank you. >> and now recognize the gentleman from ohio mr. davidson thank you, mr. chairman and chairman powell thank you so much for your testimony today. before i get into my prepared questions i have two follow-ups to previous questions. one, chairman bar asked you about intervention in terms of selling assets in a particular scenario where the yield curve may become inverted, whether

monetary policy might be appropriate up to and including selling assets in order to prevent a yield curve inversion, and just for clarity, if yield curve inversions are generally seen as bad, why wouldn't intervention to prevent a yield curve inversion be seen as good? >> well, so in terms of yield curve inversions i think the history is really what it is but it's a history of times when the fed has gotten behind and has had to raise rates really fast and that's not where we are right now. i think most observers of this environment don't see that problem and so if you look at, you know, projections of the likelihood of the recession the next year or so they're very low as low as they normally are so i don't look at the current yield curve situation as a problem needing a solution. i also going to the issue of selling assets though, i really like our current plan of

allowing these mbs and treasury securities to roll off passively the market has accepted it. i'd have a high bar for wanting to change something that's working very well and four years is not a long time. we'll be back to some kind of new normal within four years and i think my strong prior would be to let the successfully announced and created programs just run its course. >> thank you, chairman. also, chairman henserling asked you about the ioer payments and i think your answer was that they're constrained by commercial rates, so things that are available in the marketplace but i would note that an interest rate consists of generally of two parts. one is time value of money and the other is default risk, and presumably, ioers don't have a default risk so i'm not sure that's the right metric. would you care to comment on that? >> what the law i think says is that we shouldn't pay interest on reserves that's greater than

the general level of short term interest rates. >> but those short term interest rates so i guess i see perhaps a need for clarification on the law because those short term interest rates contain time value of money risk but also default risk, whereas ioer does not contain default risk so the real alternative for a financial institution in the market isn't a one for one rate if they make loans out in the marketplace, they inherently have default risk that the ioer does not have >> you know, again we're trying to manage what we're trying to use that tool to do is to set short term interest rates for the public, so and those a lot of those will have a credit risk component. these storm interest rates really don't have a big one particularly repo secured by treasury. thank you, chairman i do have a question about the two rules of the fed two basic roles as a regulator and as a monetary

policy entity. would that be consistent with how you see the structure of the fed? >> yes. >> okay, and so to understand the internal operations, do you actually track the budget between the two activities separately? i mean are there people that are generally involved in regulatory activity and then a different body of people generally involved in monetary policy? >> you know, each different divisions do have different budgets and we do look at it from a functional basis but it's pretty intertwined as a matter of fact. we do call upon what we learn in the supervisory and regulatory space and we do get a lot of input the board gets briefed on that and it informs our monetary policy and i think our knowledge of a transmission mechanism also informs supervision so there's quite a lot of intertwining there it's not a clean separation. >> but internally there's already some level of separate budget for the activities involving regulators. and i guess my particular

curiosity involves a bill that we've put together called hr4755 the federal reserve regulatory oversight act and this would put the regulatory component of the federal reserve on appropriations which would be to me a compromised position because we could propose putting the entire federal reserve on appropriations. this would be the purpose would be to focus on the regulatory side so all the standard strings attached to an executive agency that's engaged in rule making applying to the regulatory side of the federal reserve and the same way that others do, and so i hope that we can enact that later in the year. my time has expired. >> time gentlemen has expired the chair now recognizes gentleman from indiana mr. holli ngsworth and informs all members a vote is currently pending on the floor. >> well i appreciate you being here and have heard great things about the testimony that you've

given so far so looking forward to opportunity to continue to interact with you and work with you in supporting the fed's stated goals. i wanted to ask some questions i hear a lot about in district which is you know as we continue to see unemployment tic lower and lower one of the questions i get a lot is why aren't we see ing more wage growth across the country and what's constraining some of the wage growth that maybe happening as we tend to push down unemployment and whether that reflects on the phillips curve is in theory somehow incorrect or whether it's kinked and non-lynn area curve or what your views are on that. >> there are two ways to think about it one is for wages to go up you need higher productivity and we have very low productivity since the crisis and it's offing about .5% per year so we need to get that up but maybe more relevant to your question is as you get this close to full employment, you would think that there will be some tightness in the labor market, you would think wages would bid up and we're going to

be looking at that as one of many indicators of where the natural rate of unemployment is and i wouldn't say it's a great mystery but i would have expected to see more increases in wages and frankly i would expect to see more increases in wages in the next year or so. i no one of the theories that the fed has put out quite a bit is called a shadow labor market, a great number of people that aren't currently participating in the labor market and might be tempted to come back in or lured back in. do you still think that's the case that higher wages or more employment opportunities might lead to more people getting into the workforce is there some sort of decay in their skillset if they've been unemployed for a period of time that might lead them not to participate in the workforce and need some help getting back into it? >> you know, we've seen the labor force participation rate go sideways now for four straight years and that is actually a big gain against what is a downward trend due to aging and other things so i think we've seen some of that. we've seen people either not

leaving or coming back in the labor force as its gotten tighter. how much more of that can there be, you know, i hope there's a lot more but -- >> still about working age population individuals though that are less employed or less likely to be looking for employment than they were maybe 20 or 30 or 40 years ago and so i think i've certainly heard the demographic argument made in one of our private meetings before is holding on to current labor force participation is a gain once you look at the demographic would be falling out so it seems like working age individuals are still challenged to get back into the workforce. have you seen that or some some anecdotal or statistical evidence as to what that might be leading to or what the cause might be? >> so actually labor force partition operation by prime age workers is still more than a full percentage point below where it was bit crisis. two things were you're getting a signal but there might be more slack or wages and prime age

labor force there are many other ones that suggest they're at or above full employment so it maybe that those people that there are some portion of those people can come back in and it may be that it's mostly structural. the only way to know is to find out, so i think with relatively low unemployment we're close to full employment now we should be finding out whether we can keep these people or get them back in the labor force. >> does that imply and i've read in other comments that you've made and please don't let me misconstrue them because i don't want to mischaracterize what you're trying to say that there might be a tolerance to continue to see more and more tightening in the labor market and maybe run above historical average inflation and a goal to try to drive more wage growth and get more people back into the workforce? is that a fair characteristic of what you said before? >> you know, i think we're engaged in a process of discover ing the natural rate. it's i think the median sep participant says it's in the mid fours that sounds about

right to me. i think in terms of inflation we haven't said that we're seeking inflation above target. what we say is that, you know, we would look at persistent deviations from inflation both above and below targets as being undesirable and we'll conduct policy to move policy to move inflation back to target. >> when you think about just one last question maybe more generic when you think about the economy today do you think about monetary policy today and maybe its future as well, what keeps you up at night what are you most worried about with regard to the economy like you mentioned productivity monetary policy? >> i think right now the economy is in the best shape its been in a while and that's true around the globe. we're having a moment of global growth. it's great to see so we have problems associated with strong growth and that's a great relief and my hope is that we can sustain that for as long as possible. >> understood. with that i give it back mr.

chairman. >> time has expired there being no further members in the queue i'd like to thank the witness for his testimony today, without objectionable members will have five legislative days in which to submit additional written questions for the witness to the chair. chairman powell i would ask that you respond to this as soon as you are able. this hearing now stands adjourned. >> all right, you've been watching a very interesting exchange with the chairman of the federal reserve jerome powell it's his first time speaking before congress in that capacity here, and of course, as is always the case when you speak before congress, you get to speak very little. they get to speak a lot more whether republicans or democrats but some interesting developments as the markets are getting whip sawed by this trying to get the first indication of what the new fed chief thinks, and right now he thinks we're doing pretty well. he thinks the economy is chug ging along nicely and to buttress that of course we've

got consumer confidence numbers that were hyatt a 17-year high we've got numbers out of stores like macy's and dillard's that were higher-than-expected to support this notion the economy is picking up steam. the flip side with the economy picking up steam is that means interest rates have to go higher and in so many words and of course you don't have to go through tea leaves but the federal reserve chairman seemed to make it clear that this just wouldn't warrant, you know, one or two more rate hikes maybe more could be and it was that notion that more could be than conventionally thought, that at one point propelled the dow downward by about a hundred points and i know for a lot of people listening to these exchanges and back and forth and acronyms and jargon whether you're democrat or republican, offering rare time for the fed chairman to say pretty much anything, this was his first trip out in this capacity so we felt at fox business that warranted this non stop coverage , we won't do this all the time but we thought in this

particular case, why hear it from us, hear it directly from the source even if you couldn't hear him all the time. so we just thought that we would afford you that opportunity and see what the markets focus on while all the time looking at the market reaction to this and again, the gist is this. jerome powell likes what he sees he likes the growth, he's already looking at a pickup in economic activity can't factor in how those tax cuts figure into that but they are going to figure into a stronger economy that will likely lead to higher rates the question is how much higher? adam shapiro on capitol hill with more. how are they digesting it? adam: well you know you saw what happened when jerome powell when the fed chair actually talked about the fact that he expects inflation to accelerate you saw the market react to that but what he didn't know is whether he would be in favor of more than the perhaps three interest rate increases that we are expecting, he did say that in a couple of weeks when they have the march meeting we're going to

get are we essentially still on track among the different members of the federal reserve for three interest rate increases, more or less? but listen in his own words as he tried to address the issue of what's going on with inflation because it's not growing at the pace the fed would like and some of that has to do with productivity which eventually would lead them to stay put at three interest rate increases. here is what he said. >> lower corporate taxes should lead to higher investment and the effect is not easy to estimate but you would think and the studies find that it should lead to higher investment and higher investment should lead to higher productivity over time and higher productivity should lead to higher wages over time. >> the key there though, neil is should lead to higher wages in his opening statement he talked about the fact that wages had been growing at the pace you would expect with this kind of economic expansion and gdp growth according to the fed in the second half of the end of 2017, now of course interest

rates. he did talk about what's going to happen with interest rates and here is what he said personally in regards to inflation in interest rates. >> i would say that my personal outlook for the economy has strengthened since december and again, each member of the fomc is going to be writing down a new set of projections and a newest it matt of appropriate monetary policy as we go into the march meeting which begins three weeks from today and so i wouldn't want to pre-judge that. adam: there of course were other kinds of questions and there were questions about immigration and the daca, he did not want to get involved in that political discussion here on the hill but that was just some of what we went through today testifying as the fed chair for the first time back to you. neil: thank you buddy very very much. we have a ratio on the questions and answer was about 97:3. 97% questions 3% in him answering the questions. i don't know probably an

exaggeration but i should stress bond yields were backing up on this talk about strengthening economy and that was weighing on the markets instead of going back and forth now down about 33 points deirdre bolton here, he seemed to be couching as all fed chairman would probably advice, but he definitely wasn't, you know, holding back on the strength of this economy. it's strong and it picked up considerably just since december what did you make of it? >> yeah, neil i'm with you. he even gave three reasons why the economy is strong. he talked about unemployment being at a 17-year low. he talked about inflation moving towards target, which most traders heard as okay picking up and that's exactly why you saw bond prices as you just talk about fall, same as stocks and those yields on bonds go higher, and he talked about global economic strength, so he even gave the reasons for more optimism and his view of strength underlying strength in the u.s. economy so to your

point now we did see stocks sell-off on his comment and we saw bonds as well sell up but still that yield below that key psychological level of 3% so i think it's just a matter of investors adjusting to this idea that okay, maybe the market starts to price in four increases instead of three, which was more or less assumed for this year, so you do see investors digesting that and then of course, just worth not ing, you know, the prior three days so yesterday and then thursday and friday from last week we did have stocks who close higher, so i do think it is natural to see a little bit come off the table today, neil. neil: no i think you're right about that. you did mention about the market volatility at the out set at the beginning of his remarks they won't necessarily stop rate hikes he didn't say it but that that won't come into play here. do you think he was kind of fib bing a little bit there? >> i think he was hesitant big time, neil. i think the fact that he wants to wait until what the expectations are until the next

meeting that's fed speak for we have no idea what's going to happen and flyby the seat of our pants and tell you what we decide at the next meeting. traders immediately don't have that luxury. they have to place their bets with real money not academic models. uncertainty reared its ugly head today. neil: are you more certainly though we're going to see more rate hikes keith than we would have going into this testimony? >> my read on powell is a, he was very credible very controlled and i thought she logical so i like that. what i did not like was the fact that he lied on models and repeatedly referenced the growth there's things there that are more cooked than the christmas goose. i think we're going to have more rates and the markets haven't adequately addressed that next 48 hours are very critical. neil: they're still very volatile deirdre that has not changed. >> they certainly are and i feel like volatility is here to stay and we're in this ninth year of a bull market this kind of ease is not going to last forever and i think what we saw those two

crazy weeks earlier this month, the sell-off and of course a lot guided as well by computer- driven trades, in addition to fed powell's testimony, there were also two data points that i think investors are mixing in as well. i mean consumer confidence for better or worse came in at the highest level since the year 2000 that stuck out in my mind. neil: that's right. >> and then u.s. home prices actually continuing to rise as well, so that sort of backed up i wrote down this magic phrase he said my personal outlook for the economy is strengthened since december. i do think there's at least four rate hikes neil. neil: we'll watch very very closely guys thank you both very very much. just to review the markets followed this the more it looked like rates would go up or that they would be more than we thought they fell. the less it looked like that would be the case, they bounced back. they were at their worst levels down about 120 i believe now down about 22. we'll have more after this.

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airlines wanted to cut ties with the nra and end what would have been discounted rates for nra members so it created unexpected sources in georgia they're trying to end tax exemption that it enjoys right now that could be worth at least a few million dollars some say up to $50 million for the company the georgia republican congressman who thinks it's a good idea, doug collins, congressman are you punishing delta because of the nra move alone that it it it is discontinuing this program? well well let's get this straight is delta made a very big miss calculation and what they didn't understand is one of the very strong sentiments in the senate down in georgia in the legislature and many of the senators took it as a direct front to a conservative value but i have with all due respect to the governor is working on this and i think you're going to see a solution and something that -- neil: but you're threatening not you, but those state lawmakers are saying we're going to take

this away from you because of that move. that sounds pretty big brother- ish to me. >> well i think what they're saying is look, many times when you attack what is amazing is when little organizations attack things that get attacked on a conservative side people are going to respond. many times they don't respond what the legislators are doing is responding saying we don't like what you did and we'll take a closer look at this. neil: let it hurt their business let them take suffer in the free market as a result. you would be if there was something that a left leaning group had wanted to see and a company did the opposite and wanted to pick at them and this is just as bad as worse right? >> well look this is exactly what i said neil, look we think they made a mistake they are going to adjust it the senate is going to react as a political body does but governor diehl, i have faith and the rest of them to work that out down there and delta understands i think the

misscalculation -- neil: the move you either change your position on the nra or you're going to lose this. >> well that was the lt. governor. neil: but that's the issue he is expected to force you either reconsider your association right now with the nra or you're going to lose this. i mean, that's an episode out of the sopranos. >> also out of the election year too. neil: so let the people decide it they're so offended by this and there are a lot of people who are all of these companies walking away and scared about being associated with the nra, i can understand a lot of their concern are they big gun owners supporting the second amendment but this is going even further right? >> well i think it is and that's -- neil: or do you think it's a mistake, congressman? they're going one step too far here? >> well they're highlighting it more than they should. they made a mistake, i believe they made a mistake. neil: you just said they made a mistake as a private company and they're also a big employer in your state right? >> oh, they're very much so but look they will have to adjust

that to the market. there's two separations here you can express dissatisfaction with what they did but also find a way to get legislation that needs to pass in georgia to get that passed because there's ways that are out of compliance with federal regulations and this is by part way of bigger package of tax relief. neil: i understand that but congressman you have to realize that someone threatening, you know, a tax break because you're not sharing their view on an association with an organization, the nra be careful what you wish for because if every state, locality on the federal level did that with decisions that companies make that might not be popular man oh , man, you might as well kiss capitalism goodbye right? let them suffer the consequences of their actions. >> i'm all for that and i think they are going to suffer the consequences for that. neil: have you told that to your colleagues? what is the middle ground here if they don't retreat on this it sounds to me like delta is going

to get kicked in the hiney. >> i think the issue is they will find a solution neil and it's very volatile feelings on all sides of this coming out of the past week and a half and what we got to do is focus on getting back to governing. neil: but what's the middle ground here? i understand some of these legislators of being upset with this move and they don't support it and they are big backers of the nra, fine but all of a sudden you say unless you change your mind which is a business decision many companies backed away from the nra, whether you find that justified or not it's another story but georgia's adding into the mix that possibly we're going to punish you for that. let them see how it fares in the marketplace. >> well and again, i think what you've got to look at here is what was said by the lt. governor and also worked on in the process what a middle ground will be neil that's for them to decide. neil: i think regardless of using the nra, big supporters of the second amendment i think that you think this is dopey.

it's a one leap too far. well i think its put a lot of people in a different position that maybe we can focus on the issues we need to focus on. it happened to come up in a week in which it was there and and available and many times conservatives felt left out and if something like this comes up how do we express those views. neil: what if delta looked at this congressman and say we've been based in atlanta we make a corporate decision, as dozens of others have to sort of separate from this nra association for the time being maybe longer and now they're jerking us. what's to say that delta says goodbye, georgia. >> well i think that's, they're a hometown airline. look i was in the state legislature when delta was hurting and we actually began a process of helping with that. this has gotten to be an issue we look at in the long term. neil: but a tax break is being reconsidered for them simply because of a decision they made to distance themselves from the nra, and that is a slippery slope.

you'd have to acknowledge that as a democrat legislator, that's a slippery slope right? >> well i think it can be but that's exactly why it would be governor diehl and others are saying let's fix this and make a place where most can live. neil: do you know where the governor stands on this is he going so far as this? someone has to wake up and realize there are a lot of other companies doing this do we just stop our association with them as well? >> well i think what we have found is a unique opportunity on a bill that was beforehand that had a unique connection to a company that did this. neil: this was a strong opportunity, congressman. this wasn't a unique opportunity , you saw this, but it seemed like some people saw this tax exemption and said this is where we can get them. >> well i think also there's another part of it and legislators that didn't want to do this for other reasons. neil: then they should say that. >> that's more of an issue so i think it will work out but also at the same time there are always slippery slopes that's why we need to continue to see a

economy that continues to work. neil: yeah the tax exemptions that stand on the tax exemptions merits are not what a company does or doesn't do on the marketing front and if it doesn't pan out for the company they're the ones that will suffer not you guys. >> oh, and i believe delta is finding that out very quickly right now. neil: thank you, sir. >> take care. neil: more after this.

neil: all right, fed chief jerome powell made it clear rates are going up didn't telegraph how much they're going up but they're going up and already depends on somehow as being seen not in prices though, but it is a double wammi for those looking to buy a home that the price of those homes are climbing as well as the cost to get the mortgage for them if you're so lucky housing expert on this, rick what do you think how does it look right now? >> i think the numbers are speaking for themselves right now neil. we've had two consecutive months where existing home sales have dropped two consecutive months in four of the last five were new home sales have dropped.

prices are simply accelerating faster than people's wages are and you layer on top of that higher interest rates and it becomes difficult for a lot of people to find homes they can afford. neil: so rick what is the cutoff point? we look at things in traditional 30 year fixed rate mortgages i know you have 15 years and all that and a lot of variations but what is sort of the cutoff point for a lot of people when you get close to 5%, 6%, what would be the point at which people say no more? >> well you and i had are probably both old enough to remember when we had mortgages with two numbers to the left of the decimal point. neil: absolutely. >> so it really depends on everything else what wages are doing depends on where home prices are. what i would tell you is that in some of the hotter markets, seattle, san francisco, dallas, austin, places where home prices have been appreciating very rapidly we're very likely to see home price appreciations at least start to slowdown. if not to start to see a minor downturn in some of the home prices as interest rates tic up.

in context, neil, the average borrower will wind up paying about $30 extra per hundred thousand dollars financed every time the rates go up by a half a point, so if the median price of a house today is $240,000 that's about $75 a month doesn't sound like much but it adds up to about $27,000 over the life of a loan. neil: holy cow no it does add up to your point rick thank you with all this breaking news i wish we would have more time but i appreciate your insights on this so get ready for more of the sticker shock. but a lot of big ceo's have been telling us on this very show that the tax cuts are helping them and helping their workers, and helping their shareholders so why are so many democrats dismissing them? the political fall out after this.

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>> how our starbucks employees benefiting interest this new tax law? >> well we had approximately $500 million benefit as a result of the tax cut. i personally did not believe that america needed a 21% corporate tax cut but as a result of that, we gave a significant part of that tax benefit back to our people on top of what we had already done

over the last couple of years. neil: all right that was star wars, not star wars, [laughter] , one of those days folks, so mesmerized by that fed hearing anyway starbucks legendary founder howard schultz and he was not a big fan of the president but he is certainly applauding the tax cuts because it benefits his company and lots of other companies and you know the drill and you've heard that drill in fact jerome powell himself the federal reserve chairman indicating its been the wind at this economy and markets back. charlie gasparino, market watch er scott martin. scott all these companies are saying, you know, whatever we think of the president, this is helping, warren buffet added $29 billion to the bottom line for berkshire hathaway. >> we suddenly like the money and it's almost like silicon valley which is where it's typically the left leaning companies are going to the dark side maybe, and saying hey -- neil: i see where you're going

with this. there we go. probably about 10 seconds ago but here is the funny thing tim cook some weeks ago said $350 billion was coming back to the u.s. for investment as a result of the tax cut so it wasn't the popular thing at the time as we were leading up up to this passage of this great bill to say we're excited about this but proving positive in the earnings reports and comments from charles, howard schultz as the rest. neil: that's fine. >> with the rest about saying how much better it's for the workers. maria: what do you think? charlie: call me sif lord by the way, [laughter] listen i don't think we really know if this thing is going to produce what it's purported to be. i'm all for 21% corporate tax cut. the devil is going to be in the gdp details and i'll tell you this there's two ways to look at this. do we get a lot of stock buyback s because as much as they're handing checks out to these workers that's peanuts compared to the amount of stock buybacks they are going to do

and berkshire hathaway one of the reason the market was up yesterday 300 points is because bark sure hathaway announced a major stock buyback. neil: he didn't have enough great things to say. he likes low corporate taxes but here is where the rubber meets the road and i can't tell you when it's going to happen but next year when we see do we see consecutive 3% gdp growth, 3 plus, that actually pays for the deficit that these tax cuts are going to create. now if we get that you can make the case that interest rates shouldn't spike right? and i think that will go a long way because you don't have to add more to the debtor sell more treasury bonds. neil: wouldn't interest rates go up just on the basis of an improving economy? charlie: i don't see that. >> but i think charlie's right then if you don't get that growth or pay for the tax cuts you get a massive pile of debt and you've got problems with respect to the financing of the debt anyway. neil: i sound like a broken

record this paying for the tax cut of 1.5 trillion over 10 years and everyone ignores the 8.5 to 9 trillion in extra spending but leaving that out all i'm saying is wouldn't you worry about the backup in rates that could come and when they let the poor federal reserve chairman speak today, that was one of the issues that i was interested in. charlie: unwinding the balance sheet. neil: well getting back to an economic pick up is going to that's one of the things, do you think that that will offset then whatever gains. charlie: that's what i'm saying if we can get the 3% growth we spent a lot of money let's face it last budget and you made the point trillions of dollars added to the deficit. if you get the growth -- neil: they're only concerned about paying for the cuts. that's what everybody -- charlie: but if the tax cuts caused the growth that can pay down the deficit that's what mulvaney always says.

he says listen, in order to pay down the deficit, you've got to get 3% growth plus. >> and if the growth comes the s&p 500 goes higher above 3000 so you have 401 (k)s that get the boost. neil: there's so many, you know, jpmorgan now saying higher rates themselves could fuel a $7 billion profit boost to them on top of the boost. charlie: i'm not talking about the type of rates i'm worried about. neil: i understand and it's a legitimate worry but obviously they let the poor fed chairman speak today what he seemed to be hinting at is i see net-net good here do you see that from these tax cuts from the economic activity happened because its picked up steam. he sees it picking up steam, he was telling it to worldwide phenomenon. charlie: i. >> but here is the thing the last couple weeks are a tell tal e sign because the s&p 500 when rates tic up, 30 year mortgage is about 4.5% i know they give you a lower rate

charlie. charlie: of course. >> but the reality is the market had an adjustment period so that's the thing i'd watchut for isates will definitely be capped they aren't going crazy. neil: what happenedo 3%, 1 year gets the 3 but i it just that moment? arlie: markets will react and adjust to that, that's what you'redeficits and one of the ts that concerns me i'm 90% in your camp one of the things that concerns me is that everybody is taking down their estimates on gdp growth and if you don't get that 3% gdp growth you're going to have you're not going to be able to pay for the budget that we have. >> and the fed is calling for 5% and like somebody sharpens a pencil there, they trade the crayons in for pens. neil: i couldn't believe that. >> it's a world bank move. charlie: now that scares me because the atlanta fed is always overoptimistic. >> and now they're coming down. neil: middle ground its got to

be over 3. it has to be. >> absolutely. neil: guys thank you both very very much the dow down 93 points that's just since charlie was talking. charlie: [laughter] . . . . . whoooo.

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i made my own way, now it's time to make yours. ♪ ♪ everything is working, working, just like it should ♪ hey maya. what's up? hey! so listen, i was taking another look at your overall financial strategy. you still thinking about opening your own shop? every day. i think there are some ways to help keep you on track. and closer to home. i'm all ears. how did edward jones grow to a trillion dollars in assets under care? thanks. by thinking about your goals as much as you do. neil: all right a look at the dow as we wait for the president. he will have a meeting with house members on trade. the dow down about 100. it is uncanny, folks, as riveting you might have felt the exchange back and forth with the

fed chair on capitol hill was, anytime he hinted more rates expected to come, they sold off. when he dialed it back they came back. they seem to be assessing more rate hikes than they wanted. not food for them. things could change. trish regan will change it. trish: you better believe it, neil. we have a market down 100. why? on good news. the economy actually getting better. that is what the new federal reserve chairman jerome powell is saying publicly for first time. maybe there is a little inflation. maybe they have to raise rates. maybe that's a good thing. maybe we're returning to normal. i'm trish regan. welcome to the intelligence report. mr. powell says his outlook on the u.s. economy has strengthened since president trump's tax cuts. what does that mean for interest rates? they may move a little higher. i think we can take it. we'll talk to dennis gartman